According to the House of Lords European Union Committee, The UK financial services industry constitutes around 7% of UK GDP, directly employs 1.1 million people, two-thirds of them outside London, and contributes a significant proportion of tax revenue. Avoiding major disruption to this industry and the resulting job losses should be a high priority in the Government’s negotiations on leaving the EU (i.e. Brexit).Financial services and the UK economy:
1)The UK is the world’s largest exporter of financial services and insurance: in 2013 UK net exports were $71 billion. London is ranked by the Global Financial Centres Index (GFCI) as the world’s leading financial services centre, just ahead of New York and significantly ahead of other EU cities.
In 2011–12 thesector contributed 12% of PAYE income tax and national insurance, and 15% of onshore corporation tax received by the Exchequer, and in 2013 employed an estimated 1.1 million people.
In his evidence to this inquiry Anthony Browne, Chief Executive of the British Bankers’ Association, put these figures in context: “Financial and related professional services pay over £60 billion a year in tax. Of that, banks pay about £31 billion. Of that £31 billion, slightly over half … is paid by foreign banks based here. It is worth noting that that is bigger than the entire UK net contribution to the EU budget.”
2)When related professional services are added, the UK workforce in financial services numbers nearly 2.2 million. This includes 483,000 in management consultancy, 314,000 in legal services and 391,000 in accounting services.
3)The health of the sector is thus hugely significant for the UK economy.
Moreover, while ‘London’ or ‘the City’ are often used as shorthand for the UK financial services industry, the reality is that a large proportion of jobs and activity in the sector are based in other parts of the UK.
4)The UK financial services sector plays a vital role in providing services to the wider economy, both in the UK and internationally.
Analysis by the consultancy Oliver Wyman calculates the annual financial revenues at around £200 billion, £90–95 billion of which is domestic business, £40–50 billion relates to the EU, and £55–65 billion relates to the rest of the world.
Task: Answer the following questions.Discuss the economic (and non-economic) impact of ‘Brexit’ on the UK’s financial services sector
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